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Local officials question tax reform bill

A tax reform bill that flew through the state legislature last week will change the way local governments fund schools and other services.

The biggest change is the bill replaces property and sales taxes on cars with a one-time title fee.

Local government officials are trying to wrap their arms around the implications of the fast-tracked measure, the biggest tax-code overhaul in Georgia in decades. Clarke County Tax Commissioner Mitch Schrader said Athens-Clarke commissioners have asked him how county revenue will be affected, but he can’t give them an answer yet.

“We are trying to do some analysis, but there is certain information that isn’t available to us,” Schrader said.

For example, when a person trades in a used car for a new one, the trade-in value will be subtracted from the new car’s price when calculating the title fee. But Schrader said he doesn’t know how many cars are traded in or what they’re worth.

Car owners pay property taxes — sometimes derisively called the “birthday tax” because it’s due on owners’ birthdays — when they renew their license plates each year.

Car owners paid $2.5 million in property taxes to the Athens-Clarke government and $3.5 million to the Clarke County School District last year, according to tag office administrator Toni Meadow. The office issued or transferred 21,022 car titles in 2011, she said.

When the tax reform legislation takes effect next March, assuming Gov. Nathan Deal signs it as expected, people who own the same cars will continue to pay property taxes. But people who buy cars no longer will pay sales or property taxes. Instead, they’ll pay fees of 6.5 to 7 percent of the price of their cars. The fee will apply to anyone who applies for a car title, including used-car buyers or out-of-state residents moving to Georgia.

State, city and county governments and school districts will split revenue from the title fee according to a formula. Local governments will receive an estimated $58 million windfall in fiscal 2013, but by 2015 they’d face a $151 million shortfall, according to a Georgia State University analysis.

The bill guarantees local governments $1 billion in revenue combined, rising 2 percent each year, and the governor-appointed state revenue commissioner has the power to change the distribution formula if it falls short. A spokesman for the Department of Revenue declined to comment because the bill still is awaiting Deal’s signature.

Many city officials are skeptical of the bill, said Amy Henderson, a spokeswoman for the Georgia Municipal Association, a training and lobbying group for cities.

“The big question is going to be, are those numbers right?” Henderson said. “Two, can we trust future legislators not to take that money if the state needs it?”

The tax reform bill grew out of recommendations from a group of economists and business leaders former Gov. Sonny Perdue appointed in 2010. Lawmakers scrapped that group’s suggestions last year over concerns they would raise many Georgians’ taxes, and a panel of legislators began working on a new set of reforms.

House Bill 386 also includes tax breaks for married couples, farmers, airlines and manufacturers, and restores the sales tax holiday for back-to-school shoppers. It would charge taxes on Internet sales and reduce tax breaks for well-off retirees.

The state House introduced the bill March 19. It passed the Senate on Thursday.